[Good Morning Stock Market] "Sectoral Differentiation Continues... Attention Needed on Growth Stocks"

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[Asia Economy Reporter Park Ji-hwan] As Samsung Electronics and other companies prepare to announce their second-quarter earnings, the domestic stock market is expected to continue a differentiated market by sector. Market experts forecast that sectoral differentiation will persist for the time being, emphasizing the need to pay particular attention to growth stocks.

◆ Nodonggil, NH Investment & Securities Researcher = Despite weak fundamentals, the KOSPI surpassed the 2200-point mark, increasing valuation pressure. The index recovery is based on expectations of profit improvement in 2021. The domestic stock market is expected to be influenced by future external improvement factors such as additional fiscal policies in the U.S. The U.S. additional stimulus package, which is under discussion including the extension of unemployment benefits, is favorable for the stock market. The preliminary University of Michigan Consumer Sentiment Index for July showed volatility ahead of the second wave of COVID-19 and the end of unemployment benefits. The U.S. additional stimulus could positively impact consumer sentiment, sustaining expectations for economic improvement in the second half of the year. While awaiting news from the U.S., the domestic stock market is expected to continue reacting sensitively to second-quarter earnings results on a stock-by-stock basis. The delayed recovery of earnings momentum in the domestic stock market acts as a factor that strengthens and prolongs the concentration on growth stocks. Recently, the domestic stock market has been rotating returns among growth stocks, while some value stocks with low valuation pressure are also attracting attention. A strategy focusing on growth stocks while showing interest in certain value stocks such as secondary batteries, smartphone value chains, and automobiles is effective.

◆ Seo Sang-young, Kiwoom Securities Researcher = The U.S. stock market showed strength led by large technology stocks with upwardly revised target prices and investment opinions. However, sectoral differentiation was evident, with industrial and banking stocks underperforming due to the ongoing COVID-19 situation. This factor suggests sectoral differentiation is also expected in the Korean stock market. The weakening of the U.S. dollar against other currencies and the likely continuation of won strength are expected to positively influence foreign investor demand, which is a factor supporting index gains. However, one of the factors behind the U.S. stock market rise?the Republican stimulus package?was already priced into the Korean market the previous day, and although large tech stocks showed strength, concerns about high valuations following their rise raise questions about whether the upward trend will continue after this week’s earnings announcements, which may limit gains. Additionally, the dollar’s weakness, resulting from delayed economic recovery due to the spread of COVID-19 in the U.S. and U.S.-China tensions, suggests that the improvement in Korean stock market investor sentiment due to dollar weakness will be limited, which is also a burden. Considering this, the Korean stock market is expected to show a differentiated market by sector during the process of digesting selling pressure rather than expanding gains after an initial rise. In particular, as seen in the U.S. market, growth stocks are expected to have a relative advantage over value stocks.

This content was produced with the assistance of AI translation services.